MGM Resorts, King of Las Vegas Strip, Makes First Non-Gaming Investment, Buys 50 Percent Stake in Boutique Hotelier
Posted on: August 22, 2019, 11:28h.
Last updated on: August 22, 2019, 04:59h.
MGM Resorts International, one of the largest operators on the Las Vegas Strip, is diversifying its resort holdings with a 50 percent acquisition of boutique hotel operator Sydell Group, a deal that represents the casino giant’s first non-gaming interest.
MGM didn’t disclose financial terms of the deal, but unidentified sources close to matter told the Wall Street Journal that the gaming company is buying half the equity in Sydell from private equity investor Ron Burkle. Las Vegas-based MGM and Sydell have previously worked together. Last year, the companies partnered on the opening of a NoMad hotel at the Park MGM in Sin City.
NoMad is one of several upscale hotel brands operated by Sydell with the others including Freehand, LINE, The Ned, and Saguaro.
Sydell’s core expertise is an ability to collaborate with original talent within the world of design, food & beverage, and retail, and bring them together in the creation of compelling new hotels that engage the communities around them,” according to the company.
In addition to the NoMad hotel at the Park MGM, Sydell has properties in US cities such as Chicago, Los Angeles, and New York as well as two international venues in London.
Not only does the acquisition of half of Sydell boost the chances that the two companies can increase their partnership in the future, the move helps the casino operator diversify its revenue stream away from gaming.
Integrated resort operators already have experience in hotel management, so it’s not a far-flung concept for some to get involved with non-gaming situations, and MGM isn’t the first to do it. Earlier this year, Caesars Entertainment revealed plans for the Caesars Republic Scottsdale, a non-gaming property in Arizona adjacent to the swanky Scottsdale Fashion Square. That hotel is expected to be at least a four-star property.
MGM’s deal with Sydell makes sense for another reason: the hotelier’s properties are known for attracting a younger demographic. Some research reports suggest casino operators have struggled to properly market to millennials and Generation Z, the group following millennials, are only displaying tepid enthusiasm for brick-and-mortar casinos.
Partnering with a hotel operator seen as hip among younger demographics gets MGM access to those customers without having to lure them into a gaming setting.
Not Casino Close
Aside from the NoMad at Park MGM, just two of Sydell’s other US properties are relatively to close an MGM casino. The NoMad and Freehand in New York City are not far from the Empire City Casino in Yonkers, N.Y.
However, Sydell hotels in Austin, Chicago, Los Angeles, and Miami are not near MGM gaming properties. That may not matter to MGM given the high-end reputation of Sydell venues. For example, the least expensive room at the NoMad Los Angeles available this weekend goes for $355 per night, a price point typical of that brand’s properties across the US.
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